Wash. Trust tops estimates for 3Q

Washington Trust Bancorp Inc. said last week that several factors conspired to weigh down its profits in the third quarter, including a higher deposit insurance premium and a bigger loan-loss provision.
The parent of Westerly-based Washington Trust Co., Washington Trust Bancorp reported third-quarter net income of $4.91 million, down 18.66 percent from the year-ago period’s $6.04 million.
The bank said it was saddled with Federal Deposit Insurance Corporation premiums that were $543,000 higher than a year ago as the federal agency attempts to replenish the insurance fund that has been depleted by a spate of bank closures.
And Washington Trust – like almost every other bank and credit union in the region – went without a dividend from the struggling Federal Home Loan Bank of Boston, which paid out a dividend of $292,000 a year ago. FHLB of Boston hasn’t paid dividends to its member banks since the start of 2009 as it deals with losses and a weakened investment portfolio.
The bank also noted that its loan-loss provision – funds set aside for anticipated bad loans – was $1.8 million, up from $1.1 million in the third quarter of 2008. At the same time, the bank reported that it charged off $1.44 million from its total allowance for loan losses, thus declaring them unrecoverable, as compared with a $492,000 charge-off last year.
The results are “a testament to our sound business model and strong corporate brand that we were able to outperform market expectations during a period of continued economic uncertainty,” said John C. Warren, chairman and CEO, in a statement.
Earnings per diluted share declined to 31 cents from 44 cents in the 2008 third quarter. But the result beat the consensus estimate from analysts who follow Washington Trust,, which was 27 cents, according to Yahoo! Finance.
The bank recorded $43.69 million in revenue from July 1 to Sept. 30, down 6.86 percent from $46.91 million a year ago.
A net loss of $467,000 for “other than temporarily impaired” securities was charged to the third-quarter 2009 earnings. A year ago, those losses amounted to $982,000. The bank’s nonperforming assets – typically loans and leases that are more than 90 days overdue – climbed to $27.89 million as of Sept. 30, up from $24.78 million three months earlier and $6.82 million a year ago. Those nonperforming assets amounted to 0.97 percent of total assets, compared with 0.85 percent as of June 30 and 0.25 percent on Sept. 30, 2008.
Commercial real estate loans more than 90 days past due jumped to $7.97 million as of Sept. 30, from $2.76 million three months earlier. Residential mortgages more than 90 days past due increased from $3.83 million to $4.19 million in three months.
Net charge-off – loans that the bank has determined are uncollectible – for the third quarter were $1.42 million, down slightly from $1.45 million in the previous quarter, but up significantly from $432,00 a year ago.
“We believe that the declining credit-quality trend experienced in 2009 is primarily related to weakened national and regional economic conditions,” the bank said in an earnings release. “These conditions, including high employment levels, may continue for the next few quarters.”
Washington Trust’s mortgage and home construction portfolio shrank by $14.29 million in the third quarter to $604.57 billion. But the bank’s commercial loan portfolio increased to $976.32 billion, up $29.08 million from June 30.
As of Sept. 30, Washington Trust’s total assets were $2.89 billion, down $31.74 million from $2.92 billion three months earlier.
The bank’s returns on average equity and average assets for the third quarter were 7.94 percent and 0.68 percent, respectively, compared with 12.94 percent and 0.88 percent, respectively, for the same period in 2008.
The bank’s net interest margin widened to 2.51 percent in the period ended Sept. 30 compared with the second quarter, as it climbed 6 basis points. &#8226